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The Organizational Context
Project management
Lecture 2
PM is contextual
• „Successful PM is contextual” (Pinto) = „the
organization itself matters”
• Before the beginning of a project, organizational
context have to be examined, relationships have
to be specified, rules and procedures have to be
established for the successful completition of a
project. Especially in organizations where PM
practices are not the operating form.
• Most important contextual issues are strategy,
structure and culture.
Projects and Organizational Strategy
• Strategic management – the science of formulating,
implementing and evaluating cross-functional decisions
that enable an organization to achieve its objectives.
• Consists of:
– Developing vision/mission statements
– Formulating, implementing and evaluating:
• Projects are the vehicles to seize opportunities, capitalize strengths,
and implement objectives.
– Making cross functional decisions:
• operationalize business plans
– Achieving objectives
• Stepping stones and buliding blocks of corporate strategy:
operational reality behind strategies and visions
The firm’s strategic development is a
driving force behind project development.
Examples
A firm wishing to…
may have a project
redevelop products or processes,
to reengineer products or processes.
change strategic direction or product
portfolio configuration,
to create new product lines.
improve cross-organizational
communication & efficiency
to install an enterprise IT system.
Hierarchy of Strategic Elements
Vision
/
Mission
Objectives
Strategy
Fig 2.1
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Goals
Programs
Stakeholder Management
Stakeholders are all individuals or groups who
have an active stake in the project and can
potentially impact, either positively or
negatively, its development.
Sets of project stakeholders include:
Internal Stakeholders
External Stakeholders
•
•
•
•
•
•
•
•
Top management
Accountant
Other functional managers
Project team members
Clients
Competitors
Suppliers
Environmental, political, consumer,
and other intervenor groups
Project Stakeholder Relationships
Parent
Organization
External
Environment
Other
Functional
Managers
Project
Manager
Clients
Project
Team
Accountant
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Top
Management
2-7
Managing stakeholders
1. Assess the environment
2. Identify the goals of the principal actors
3. Assess your own capabilities
4. Define the problem
5. Develop solutions
6. Test and refine the solutions
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Project Stakeholder Management Cycle
Identify
Stakeholders
Implement
Stakeholder
Management
Strategy
Predict
Stakeholder
Behavior
Gather
Information on
Stakeholders
Project
Management
Identify
Stakeholder
Strategy
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Education, Inc. Publishing as
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Team
Determine
Stakeholder
Strengths &
Weaknesses
Identify
Stakeholders’
Mission
Organizational Structure
Consists of three key elements:
1. Designates formal reporting relationships
– number of levels in the hierarchy
– span of control
2. Groupings of
– individuals into departments
– departments into the total organization
3. Design of systems for
– effective communication
– coordination
– integration across departments
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Education, Inc. Publishing as
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Structure within structure
• In the structure of the whole organization
exists the internal structure of the project
team:
– Relationship between members
– Roles and responsibilities
– Interactions
• It is affected in multiple ways by the structure
of the whole organization
Forms of Organizational Structure
• Functional organizations group people
performing similar activities into departments
• Project organizations group people into
project teams on temporary assignments
• Matrix organizations create a dual hierarchy in
which functions and projects have equal
prominence
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Functional Structures for Project Management
Strengths
Weaknesses
1. Firm’s design maintained
1. Functional siloing
2. Fosters development of indepth knowledge
2. Lack of customer focus
3. Standard career paths
3. Projects may take longer
4. Project team members remain 4. Projects may be sub-optimized
connected with their functional
group
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Project Structures for Project Management
Strengths
Weaknesses
1. Project manager sole authority 1. Expensive to set up and
maintain teams
2. Improved communication
3. Effective decision-making
4. Creation of project
management experts
5. Rapid response
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2. Chance of loyalty to the
project rather than the firm
3. No pool of specific knowledge
4. Workers unassigned at project
end
Matrix Structures for Project Management
Strengths
Weaknesses
1. Suited to dynamic
environments
1. Dual hierarchies mean two
bosses
2. Equal emphasis on project
management and functional
efficiency
2. Negotiation required in order
to share resources
3. Promotes coordination across
functional units
3. Workers caught between
competing project & functional
demands
4. Maximizes scarce resources
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Heavyweight Project Organizations
Organizations can sometimes gain tremendous benefit from
creating a fully-dedicated project organization
• Project manager authority expanded, functional leaders are
subordinated
• Functional alignment abandoned in favor of market
opportunism
• Gradual shifting towards full autonomy
• Focus on external customer
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Project Management Offices
Centralized units that oversee or improve the
management of projects
Resource centers for:
–
–
–
–
Technical details offloaded from manager
Expertise in project management skills
Repository of lessons learned, documentation
Center for project management excellence
Where to place it in the organizational structure?
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Education, Inc. Publishing as
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Forms of PMOs
• Weather station – monitoring and tracking
• Control tower – project management is a skill
to be protected and supported
– Establish standards
– Consults on PM practice
– Enforces the standards
– Improves the standards
• Resource pool – maintain and provide a cadre
of skilled project professionals
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Education, Inc. Publishing as
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Organizational Culture
„The unwritten rules of behavior, or norms that are used to
shape and guide behavior, is shared by some subset of
organization members and is taught to all new members of
the company.”
Cultures are evolved not created, but they can be affected
and modified (= managed). It is unique.
Key factors that affect culture
development
– Technology
– Environment (stable or dynamic; simple or complex)
– Geographical location (social, political, physical)
– Reward systems
– Rules and procedures
– Key organizational members (founders, ”heroes”)
– Critical incidents
Culture Affects Project Management
• Departmental interaction
• Employee commitment to goals
• Project planning
• Performance evaluation
Example for the effect of culture on
projects: Escalation of commitment
• the phenomenon where people justify
increased investment in a decision, based on
the cumulative prior investment, despite new
evidence suggesting that the cost, starting
today, of continuing the decision outweighs
the expected benefit.
• other name: sunk cost fallacy
• Why it is rooted in culture?
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